Don't blame the euro, OECD says
MARK BEUNDERMAN
05.01.2007 @ 09:26 CET
EUOBSERVER / BRUSSELS - EU governments should stop blaming the euro for economic difficulties and should make their own labour markets more flexible and curb budget deficits instead, economic think-tank the OECD has said.
In its annual Economic Survey of the Euro Area released on Thursday (4 January), the Paris-based organisation delivered the message to member states of the 13-nation eurozone that it is up to them to make the EU's common currency into a success.
The OECD has told eurozone members to stop blaming the euro for their economic problems (Photo: European Commission)
The report challenges claims that the euro has led to disappointing economic growth in some states, while at the same time limiting national governments' means to react to economic downturns.
"In the public debate, the union's poor performance in these two areas has often been blamed on the single currency itself. However, this criticism is misguided," according to the OECD paper.
"The economic problems are mainly structural; the solutions therefore are largely in the hands of individual member governments. Thus, the primary policy challenge for the euro area is to improve growth and resilience by boosting economic flexibility."
The think-tank urges eurozone capitals to loosen lay-off rules, boost wage flexibility by making less use of collective wage agreements, reduce red tape barriers for labour mobility and open services and financial markets.
Further liberalisation matters not just for individual countries' economies but is also crucial for the future of the common currency as a whole, according to the report.
"Some countries are more flexible than others, and this matters because it implies that the common monetary policy will often be too loose for some and too tight for others," it says.
"For that reason, the single currency would be more beneficial for everyone if structural reforms were put in place so that economies became more flexible and more tightly integrated."
Chirac still blames euro
But on the same day as the OECD launched its report, the trend of blaming the euro appeared to continue, with France's president Jacques Chirac criticising the European Central Bank (ECB) - which manages monetary policy in the eurozone - for failing to stimulate economic growth.
Mr Chirac in a speech questioned the ECB's exchange rate policy, saying "the European Union cannot be the only continental entity that's not using any of economic, industrial, commercial or monetary-policy instruments,'' according to newswire reports.
"It's time to exercise economic sovereignty with the setting of an exchange-rate policy and the rest of its commercial policy,'' he stated.
Mr Chirac's words follow a series of attacks by French politicians - among them the presidential hopefuls Nicolas Sarkozy and Segolene Royal - on the ECB for hampering economic growth by its one-sided focus on inflation.
The OECD by contrast defended the record of the ECB, stating that "the European Central Bank's (ECB) monetary policy has succeeded in anchoring inflation expectations around the price stability objective."
